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On The Case

In bizarre sextortion case, 9th Circuit rules sham litigation threats can be a crime

(Reuters) - Throwing around completely baseless litigation threats isn’t just bad strategy. It’s potentially criminal, under a ruling this week from the 9th U.S. Circuit Court of Appeals in U.S. v. Koziol, a tawdry case involving a nude massage gone awry and a million-dollar extortion demand against a singer with a wholesome reputation.

Keep in mind that the singer, Andy Grammer, had absolutely nothing to do with the nude massage. Instead, it was Grammer’s manager who received the massage, in 2016, from a woman he found at Backpage.com. The session ended badly, with the masseuse allegedly trotting out a Doberman Pinscher and ordering the man to leave her apartment.

A few days after the encounter, according to the 9th Circuit, the manager received a voicemail message accusing him of verbally and physically assaulting the masseuse and demanding a payment of $250,000. (The 9th Circuit opinion did not name the manager.)

The manager’s lawyer, Kerry Wright of Glaser Weil Fink Howard Avchen & Shapiro, quickly negotiated an agreement in which the manager denied the masseuse’s allegations but agreed to pay her $225,000 in exchange for a release of her potential claims.

But that was not the end of the matter. Several months after the settlement, the masseuse’s self-identified husband, Benjamin Koziol, surfaced with new threats and demands, according to the 9th Circuit. Koziol initially claimed that he had been present in another bedroom during the 2016 massage and that the manager had roughed him up when he tried to protect his wife. Then Koziol changed targets, claiming that it was Grammer – not Grammer’s manager – who had received the massage and had assaulted Koziol.

Koziol claimed Grammer had used vile language against his wife and had punched him in the face when Koziol intervened. He asserted that he had evidence – text messages, video and a photograph of his purported injury – and told Grammer’s lawyer, Reid Hunter of Serling Rooks Hunter McKoy Worob & Averill, in several emails that he intended to file a civil suit exposing the singer unless Grammer paid him $1 million.

Koziol’s threats were entirely baseless, according to the 9th Circuit. He concocted the photograph purporting to show the facial injuries he received and later admitted that Grammer was not present during his manager’s 2016 encounter with Koziol’s wife, the masseuse.

Grammer, who has described his niche as “uplifting, positive and ‘clean’ music,” was nevertheless distressed by Koziol’s demands. He feared that even a totally false accusation of sexual improprieties would damage his brand.

With Koziol refusing to go away even after Hunter said his allegations were “ridiculous,” Grammer brought in a former federal prosecutor, Lynn Neils of Baker Botts. Neils told Koziol that his litigation threats were criminal extortion under the Hobbs Act. Koziol, according to the 9th Circuit, kept bluffing but never ended up filing a suit against Grammer.

Koziol was indicted in January 2018 for attempted extortion based on his litigation threats to Grammer. After a jury trial in Los Angeles that featured testimony from the singer, his manager and their lawyers, Koziol was convicted in June 2018 and sentenced to more than five years in prison. In a 2019 post-trial ruling, U.S. District Judge Christina Snyder rejected his argument that the U.S. constitution protects the right to threaten litigation, concluding that Koziol “misses the fact that his threats to file a lawsuit were found to be entirely sham in nature and thus did not merit constitutional protection.”

That’s also the crux of this week’s ruling from 9th Circuit judges Carlos Bea, Bridget Bade and Gershwin Drain. The appeals court acknowledged that the Noerr-Pennington doctrine generally immunizes litigation activity, including threats to sue, from statutory liability. But Noerr-Pennington, wrote Bade, does not provide cover for threats asserted without any credible basis – and without any actual intention to sue.

“Threats of sham litigation, which are made to obtain property to which the defendant knows he has no lawful claim, are ‘wrongful’ under the Hobbs Act,” wrote Bade.

Koziol, the 9th Circuit said, wasn’t just attempting to leverage weak claims by bluffing about plans to sue. He “fabricated evidence, lied about the existence of evidence and knew that his claims were baseless,” Bade wrote. “Koziol’s conduct … fell well outside the bounds of legitimate pre-litigation settlement demands.”

Koziol had argued in his 9th Circuit brief that other federal circuits have held that litigation threats do not constitute extortion “even when the claim is frivolous, meritless or made in bad faith.” The 9th Circuit examined the precedent Koziol cited and found most of the cases involved attempts to cite litigation threats as predicate crimes in civil racketeering litigation.

In that context, the 9th Circuit said, courts have rightly considered the policy question of whether permitting RICO suits based on prior litigation activities could dissuade legitimate underlying litigation and erode the principle of res judicata. But there are no similar policy implications, the 9th Circuit said, when a defendant like Koziol threatens litigation to extract a payment to which he has no legitimate claim.

Koziol’s lawyer, Carlton Gunn, recently withdrew from the case and was replaced by Gail Ivens. Ivens, who has requested an extension to file a petition for rehearing at the 9th Circuit, did not respond to an email request for comment, nor did the manager’s counsel, Wright, who testified at Koziol’s trial. A spokesman for the Los Angeles U.S. Attorney’s office declined to comment. The 9th Circuit did rule that the trial judge may have erred in Koziol’s sentencing and remanded the case for resentencing.

Grammer said in an email comment that he’s grateful to prosecutors and the FBI for bringing the case and clearing his name. “Extortion is a serious crime, and the patently false accusations against me were devastating,” he said. “I hope that this will prevent others from going after anyone with such blatantly false claims as a means for a quick payday, and am relieved that my family and I can finally move forward.”

Opinions expressed here are those of the author. Reuters News, under the Trust Principles, is committed to integrity, independence and freedom from bias.

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